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Impact of Economic Freedom, Regulatory Quality, and Taxation on the Per Capita Real Income: An Analysis for OECD Nations and Non-G8 OECD Nations

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  • Cebula, Richard
  • Clark, Jeff

Abstract

This study of the impacts of economic freedom, regulatory quality, and the relative burden of taxation on the level of per capita real income/GDP among OECD nations over the 2003-2007 period adopts a modified version of the overall economic freedom index computed by The Heritage Foundation (2013), one with the fiscal freedom and business freedom indices removed. This study then provides PLS fixed effects estimates for five linear specifications/models. Each nation during this time frame can be regarded either as a nation per se or as a de facto “economic region” within the OECD. The analysis first focuses upon all of the OECD nations and then, as a robustness test, subsequently focuses only on non-G8 OECD member nations. The estimations in this study all provide strong empirical support for the three central hypotheses proffered here, namely: (1) the higher the overall degree of economic freedom; the higher the per capita real income (GDP) level; (2) the higher the level of regulatory quality, the higher the level of per capita real income (GDP); and (3) the higher the overall tax burden, expressed as a percent of GDP, the lower the level of per capita real income (GDP).

Suggested Citation

  • Cebula, Richard & Clark, Jeff, 2014. "Impact of Economic Freedom, Regulatory Quality, and Taxation on the Per Capita Real Income: An Analysis for OECD Nations and Non-G8 OECD Nations," MPRA Paper 56605, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56605
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    References listed on IDEAS

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    1. Gouider, Abdessalem & Nouira, Ridha & Saafi, Sami, 2022. "Re-Exploring the Nexus Between Economic Freedom and Growth: Is There a Threshold Effect?," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(3), pages 147-167, September.
    2. Daniel L. Bennet, 2016. "Subnational Economic Freedom and Performance in the United States and Canada," Cato Journal, Cato Journal, Cato Institute, vol. 36(1), pages 165-185, Winter.
    3. Ivana Brkić & Nikola Gradojević & Svetlana Ignjatijević, 2020. "The Impact of Economic Freedom on Economic Growth? New European Dynamic Panel Evidence," JRFM, MDPI, vol. 13(2), pages 1-13, February.

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    More about this item

    Keywords

    real per capita GDP; economic freedom; regulatory quality; tax burden;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • P12 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Enterprises
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights

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